Many group life insurance plans include a conversion privilege that allows departing employees to convert their group coverage to an individual life insurance policy without undergoing a new medical exam or health evaluation. This right is typically available when you leave your employer, retire, or lose group coverage for certain qualifying reasons. However, the conversion must usually be initiated within a specific timeframe, commonly 31 days from the date group coverage ends.
The converted individual policy is typically a whole life or universal life policy (not term life) at the insured's attained age. Because the premiums are based on your current age and the conversion bypasses medical underwriting, the premiums may be higher than what you would pay for a new fully underwritten policy if you are in good health. However, for individuals whose health has changed since they enrolled in the group plan, the conversion option is extremely valuable because it guarantees coverage regardless of current health status.
The conversion privilege has limitations that vary by plan. The maximum amount you can convert is typically limited to the amount of group coverage you had at the time of departure, and some plans set an additional dollar cap. The types of individual policies available for conversion are determined by the group carrier, and the selection may be more limited than what is available in the open market. There is no cash value transfer — you are essentially starting a new individual policy.
Before converting, compare the conversion policy's premiums and features against what you might obtain through individual underwriting in the open market. If your health is good, a new fully underwritten policy from a different carrier may offer better rates and more flexibility. If your health has declined, the conversion option's guaranteed coverage may be your most favorable path. A licensed agent in our network can help you evaluate both options. All individual coverage is subject to the issuing carrier's policy terms.